Bitcoin & Michael Saylor - A Masterclass in Economic Calculation (BTC005)

you're listening to tip

hey everyone welcome to our wednesday

release of the investors podcast where

we're talking about bitcoin

today's guest is billionaire michael

saylor michael is the founder and ceo of

microstrategy

a business intelligence mobile software

and cloud-based service company

after graduating from mit in 1987

michael started the company and still

holds a controlling share of the

business

michael made huge headlines in the past

quarter when he decided to purchase 475

million dollars worth of bitcoin on the

balance sheet of his company

within only six weeks later the value of

the purchase had nearly doubled

now in the fourth quarter of 2020

michael went out and issued 650 million

dollars worth of convertible notes

the reason why you guessed it to buy

more bitcoin

i've had a lot of conversations through

the years with some really gifted

investors

but being able to tap into michael's

thought process on what's happening

right now

is one of the most interesting

conversations i've ever had and for that

reason i'm calling this episode

a master class and economic calculation

with michael saylor

i hope you enjoy

[Music]

you're listening to bitcoin fundamentals

by the

investors podcast network now for your

host

preston pish

[Music]

all right i'm here with the one and only

michael saylor michael

welcome to the show thanks preston

hey so i when i'm listening to some of

your other interviews

and the one thing that really sticks out

to me

that i think is such an important

conversation for people

to to really understand

is some of your comments around

inflation

risk premiums the impact that this has

as you think about it from a business

owner

and the hurdle rate that you've got to

achieve

talk to us in depth don't hold anything

back

on this particular topic and teach

people

how you're thinking about things from an

economic calculation standpoint as the

ceo

the founder of a billion dollar company

okay look i i think we start with this

premise of

of your ceo your job is to preserve

shareholder value

you know preserve wealth that it's the

same challenge you'd have if you ran a

family office and

and you were you were responsible for

the wealth of the family

the question is how do i preserve the

value of my

individual treasury or corporate

treasury

over time so let's say i have

a million dollars so

in a hard money environment if the

currency is

is utterly deflationary if if the

federal reserve

or the central bank was going to print

no more currency

for the next decade then

uh i've got a million dollars

next year i'll have a million dollars if

i'm looking at

um the value of my cash my million

dollars

i can presumably have it sit in an

account

and a decade from now i'll still have a

million dollars of purchasing power

because

the currency is not being devalued

now if uh if the goods and services in

the economy are growing at two percent a

year

and the currency is flat then a fixed

amount of currency is going to be

chasing after

uh an increasing amount of goods and

services

you know in that particular case uh the

currency is going to appreciate in value

and so the prices are going to fall and

uh

so that's a a good thing

it means that um all i have to do is

just sit on the money

and wait and the economy will be larger

the value of my treasury will accrete if

if um the banks print two percent more

currency and the economy grows two

percent

then you've got a net uh equivalence

uh the value of my treasury won't

accrete but it won't

dilute right so in theory if you think

about the

the good old days of the gold standard

if gold has a stock to flow of 50

then it's uh it's inflating at 2 a year

and traditionally the economy of the

world and the economy of most large

countries

grows about two percent a year and so

there's

it's kind of ironic that the two percent

gold inflation

is offset by the two percent economic

expansion

and you have a stable gold dollar

or a stable amount of value and

and over time that kind of makes sense

so what happens when i start to increase

the currency if i increase the currency

five percent a year

well now will the economy grow five

percent a year

if the economy grows zero percent a year

the currency increase is five percent a

year

then i've got more money uh chasing

after a fixed amount of

products therefore the price of the

products have to keep going up

and they're going to go up five per that

the stuff that you're wanting to get the

scarce

stuff um something that you can

manufacture

infinite supply of like a copy of a

picasso a digital copy of a picasso

that's not going to inflate but the

actual picasso is going to inflate to

the extent that everybody in the society

wants that one painting

and of course what you see is that as

you start to print more money

inflation uh is not distributed equally

there's not really a single inflation

number there's a vector

of inflation in fact i can come up with

this set of prod

you really need linear algebra you need

a vector math to describe this

one set of products that are information

rich with no variable cost

like a digital copy of a picasso and

there used to be a million digital

copies

and now there are a billion digital

copies and

even if i print a gazillion percent

inflated currency the billionth the

digital copy of the picasa is not going

to be more expensive

in fact what's going to happen with a

certain bucket of

of goods that are high inflation high

information content is

they're just going to get cheaper over

time they're deflationary products

and and what's a good example of that

digital music digital video digital

photos digital services running on

networks

that have a fixed price a fixed cost

once you've actually paid

to deploy wi-fi and lte networks and

once you've built the routers

and once you've built the electrical

power plants

and once you've run all the fiber optic

cable that's all the fixed

cost the variable cost of deploying

a netflix movie to a million people

is the cost of electricity and deploying

the netflix movie to a billion people

is the variable amount of electricity

right so in essence that's

got to be like 0.1 variable cost

there is no variable cost there's no

energy content

in the product that is say oh i mean

the the perversity right is that it's

all energy

it's 0.1 of the value of the product is

energy

i'm just shipping electrons and energy

is fairly

cheap so with things like that

they're deflationary because the fixed

cost was uh is a sunk cost which is

amortized across

all of the products you've got one

iphone

you've got one television you've got one

fiber optic cable to your house

and therefore everything i can push to

the iphone and everything i can push

down the fiber optic cable

i can deliver at the variable cost of

electricity which gets

which starts to look like a a product

with a 99.9 percent

gross margin okay so what's interesting

well

in the history of the world if you roll

the clock back 50 years

we didn't have any products with a 99.9

gross margin 99 gross margin

products are a product of modern digital

networks

so apple created a mobile network

they dematerialized everything you could

hold in your hand

and that means that your vcr and your

cds and your cameras and your polaroid

photos right and your phones

and your tape recorders uh

you know and your weather your your

atlas and your maps and little

books and reminders and yellow post-it

notes

all these things had energy content in

them and they had a variable cost

i mean traditionally variable costs run

anywhere from 40

to 60 percent of the value

of the product you know you like you

have to produce it for 60

of the of the retail value and you sell

it down a retail distribution

channel and eventually the true margin

is like seven percent or

you know walmart three percent whatever

it is and the other 97

gets eaten up that's what the world

looked like

and then what happened with the mobile

wave or the last decade

is apple dematerialized all of the

mobile products or all the handheld

products and converted them from

40 to 60 variable cost to 1 variable

cost

and apple then accrued a trillion

dollars of

value because it was that network

it's crystallization and of sorts you're

collapsing from a high energy state to a

lower energy state

and when you crystallize what energy

gets given off

right and that energy took the form of

wealth created

for the apple shareholders google did

the same thing they pretty much

dematerialized every library and every

piece of

it for every book and every piece of

information and every video and every

home video and every vhs and all the

music on the earth and

it collapsed into google and youtube and

the like

and as it collapsed right like

this is a real library behind me okay

i'm sitting in a library of books and

i don't know it's a hundred thousand

dollars worth of books in this room

worthless because because you go get

yourself a 500

ipad and you can have the entire hundred

thousand books and by the way the

hundred thousand books on the ipad is

more valuable because they'll read

themselves to you

and you can resize the font i'll walk

past like this perfect

book and it's a beautiful book and i

open it up and

you know it's classic and it's like in a

really small font and i'm like

can't i pinch and zoom the book and then

i go on a trip and i'm like i really

want to take that book or those 10 books

they're really

heavy i leave you know the books have

mass

the books are static the books have to

be shelved

you know someone can take the book i

might lose the book

google took every library on earth

collapsed it

just like apple's got their ibooks right

they collapse these things

the variable cost goes to zero so you

have you have

all these things that google touched

that became deflationary

everything that facebook touched became

deflationary

everything that amazon touched the part

that amazon

eliminated by the way was like the forty

percent of the retail supply chain

that was the storefront well forty

percent of everything anybody wanted to

buy

collapsed into a mobile app on an iphone

or collapsed into a website

40 of the cost of the of the energy cost

and then you know it's you know

conservation of mass and energy right

that's

that's thermodynamics well every product

you buy

it either has mass right like the books

have

mass or it has energy i had to deliver

the comic book to the news stand and i

had to

uh some or pa i was a paper boy right

preston

i was a paper boy growing up and i

sometimes i fall into that like what

about the paper when there is

there's probably no paper boys left on

the planet that's not a job anymore

like who would deliver a a paper if i

deliver a paper

you've got the mass and that's the paper

that you know

paper is made of titanium by the way

titanium dioxide is the primary element

papers no pacifier

i got my start in business studying

titan it's heavy

i remember carrying stacks of papers

around you know it's like

a hundred pounds worth of information

it had to move through the supply chain

and then there's the energy

mass and energy the energy was like

me with my red wagon hauling a hundred

pounds of papers on a sunday morning

through the neighborhood in the freezing

snow and you gotta you know at some

point

my angelic mother at getting up at 5 00

a.m

to drive the family station wagon

keeping the heat on

while i you know while i haul papers

through the neighborhood

i delivered them by the way on

wright-patterson air force base

where i grew up i know every single

street because i had to get up

and deliver a two-pound paper to

every house across the entire military

base when

when it was like 20 below zero so

mass and energy in the news business

i expended the energy i hauled the mass

around it was quite visceral

it was expensive it's so expensive by

the way that no newspaper could afford

to hire an adult to do it hence

12 year old to 18 year old high school

kids hauling newspapers around on

their backs that was the world

that we used to live in and of course

now it's kind of laughable no one's

going to hold that stuff

yeah you probably couldn't get a 12 year

old to get up during

i remember a blizzard it got to like it

was

60 below zero preston and we're trying

to figure out how to deliver newspapers

on a sunday morning at 5 00 a.m the wind

is blowing

and on the air force base you had a lot

of traffic to contend with at 5am unlike

other places

mass and energy so facebook

google amazon apple they dematerialize

the mass

and the energy from the products all the

products are

information and electricity

and that explains why they're trillion

dollar companies and that explains

why inflation as a metric doesn't

work it might you know it's a it's a

20th century idea and it might have

almost

but i'm not sure it ever worked but

it wasn't hideously misleading

until the last decade and the last

decade

we got to the point where half of

everything you're

you're consuming is pure information

with no variable cost

so when you say it's it's been a hideous

metric

you're specifically talking about cpi

right

you're saying cpi is just not something

that can actually measure what the what

in the world's going on right now

i i'd say it's a metaphysical metric

it has no relation to reality it's it's

it's been def

it's been defined almost almost

specifically

cherry picked to define and define in

such a way that there will never be any

inflation

and and so the first irony is we've

defied

decided that inflation is a bad thing

and the second

decision is we've decided that inflation

equals cpi

and the third you know irony is we can't

find any inflation

but of course in order to really

understand

store of value in order in order to get

to the bottom of an of

investment uh rationale and make

rational investment decisions

you have to first go to first principles

and what i find is 95 percent of macro

economists

and analysts and the the traditional

investment community

they they rely upon metaphysical

abstractions that they learned early in

their career

or that are repeated to them over and

over again by mainstream media

and because they just repeat these

metaphysical abstractions long enough

they kind of convince themselves that

there's some veracity to them

and there isn't any veracity to them but

they

but the difference but

and this takes me back to mit at mit

they taught you to think for yourself

you're an engineer

if you're trying to solve a problem

you're expected to think

for yourself like for example the first

class i walked into it was a class in um

material science the professor walked

out to all the freshmen it was our first

week

at mit he said this is a tile from the

space shuttle it burned off the space

shuttle on re-entry

nobody at nasa knows why it burned off

they're not sure what to do about it but

they're afraid the space shuttle is

going to blow up if they don't actually

solve the problem

why do you think it burned off and what

do you think the solution is

and he looks at it these are 18 year old

freshmen that showed up to school

and you can see everybody's looking at

each other like is there some reading

that we missed

before this lecture and and then they're

thinking

i i didn't read the answer to the

question

and then there's this horrifying

realization that a guy with a phd with

20 years experienced

just asked you a question that nobody on

earth knows the answer to

and he expects you to think for yourself

and reason from first principles and

solve

the problem you know that's the

scientific way

and there's not a lot of science and

there's not a lot of

engineering in the modern macro

macroeconomic

uh landscape or with mainstream media

they just repeat

tropes over and over again as though

they're meaningful and they're not

i mean you couldn't provide a better

example for what we're seeing right now

from an economic standpoint it's almost

like we're seeing parts

of this shuttle call it the economic

machine that we're looking at literally

following a

falling apart right in front of our eyes

and

you still have many academics with phds

going on cnbc and talking about well you

know our

we just don't have any inflation in and

these types of things

so this is this is what i would frame it

for you

how would you michael saylor define

inflation today because you you still

have to

do economic calculation as a as a

as a business owner how are you looking

at inflation and how are you saying well

i think

if inflation's this that's my hurdle

rate plus whatever risk premium talk us

through how

you would define it considering cpi is

so broke

i i think i think

the way you define inflation is

the rate of price appreciation

in a in a basket of goods

services or assets that you wish

that you desire to acquire in the future

so um

if you live with your parents in the

basement of their house

and um you don't need a house and you

don't aspire to a yacht

a plane a beachfront uh property

if you don't and if you don't intend to

ever pay for electricity or utilities if

you borrow your dad's car

and if your mom cooks for you and you

sleep in the basement

you're going to define inflation as

the cost of beer good weed

netflix youtube i don't know

tender like uh whatever right

whatever you're gonna do when you take

girls out on a date

right that's the cause that's inflation

that market basket of things that you're

going to have to pay for out of your

pocket is inflation to you

if your father kicks you out of the

basement and says it's time for you to

grow up

and get your own place and get your own

car

you're going to define inflation as the

cost of a car

the cost of an apartment the cost of

food

the cost of the electrical utilities

right and you know and anything else

that's discretionary and you have to

embrace

food and energy and apartment

if you actually aspire to get

a phd or be a medical doctor or whatever

that might be

you're going to have to include in your

inflation definition the cost of college

education

medical school etc and and

higher education if you imagine having

perfect health

then inflation won't include medical

care

if you imagine that you may that might

actually need uh maybe you need your

your teeth fixed by the way you know

like

president i grew up on an air force base

uh

dentistry and and uh and healthcare were

free they were i was a dependent my

father was an nco

i you know i needed to go to the to the

hospital i went to the

hospital on the base everything was free

didn't really think about it

um then there was an then then we went

through this period where there's health

insurance and you

and you just went in network and

everything got paid for i have noticed

in the past 10 years preston

that none of the doctors i go to and

none of the dentists i go to

accept any of my health insurance and i

have really good health insurance

i have like world-class health insurance

but every place i go

it's like if i really want if i want a

good

good health care or good dentistry they

asked me to

give them their credit card a credit

card and i end up actually with a very

large bill

you know from from all of these doctors

you know because they don't expect they

don't accept that insurance so the

insurance life pays for half

and so if you actually want the best

medical care

you could be 20 in perfect health if you

want your teeth fixed or you want you

know whatever you need the best medical

care

then you got to throw dentistry and

doctors

not in your insurance network into the

inflation calculation

if you get to the point where you're 60

and you've you know you've got

some medical conditions you're going to

throw all of those uh

more expensive treatments you know

i uh once i dislocated my shoulder

and uh you know it was a silly accident

like i tripped on a wet

floor while i had my hands full and i

landed and now it did hurt more than

anything in my entire life

so i went to i went to the to the

hospital they reset the shoulder after a

while then i went to an orthopedist and

the guy looks at me he goes

i i said well so what do you what do you

how long will it take before i get this

cast off or this the sling off because i

you know

i googled it was like a week or

something he goes oh no

uh we need to operate on you i said huh

he goes well you know you're a perfect

candidate uh you know to have

you know some shoulder surgery you know

it we should just fix it perfectly

it's like 50 000 he goes

you're a perfect candidate for this i

was a perfect candidate

because i could afford to pay the 50

yeah or or like by the way and i said no

i'll let it heal it healed just fine

i'm not gonna there's my left shoulder

i'm not pitching

you know as a baseball pitcher i don't

really need the

50 000 operation the six month recovery

and the potential infection and

and the rest but you know the best

medical care was gonna be extended to me

because i could afford to pay the fifty

thousand dollars

so if you're defining inflation

do you want really good medical care do

you want your teeth fixed

do you want a ceramic crown right do you

want

you know silver in those fillings do you

want it

same day you know what quality of

medical care do you want uh the

inflation rate is going to go up i

guarantee you

do you want to go to harvard or mit

they're not going up at two percent a

year

i know they're going up seven percent a

year eight percent a year

now those are there is a market basket

of

of products if you sleep in your parents

basement that will be deflationary you

can probably live

fairly cheap uber is not going to go up

that much

there's another market basket if you're

gonna live on your own

it's gonna go up faster it's probably

you know x percent three four five

percent

the chapwood index starts to indicate

what if you actually aspire to own your

own house

well if you wanted to own your own house

you know housing prices have been going

up for four

five six percent seven percent a year

sometimes

so that inflation rate would look

different because

because that's an asset of course cpi

doesn't include

assets now the question is where do you

want to live

the inflation rate of real estate in my

hometown

of fairborn ohio is not nearly as high

as the inflation rate of real estate in

miami beach or the hamptons

or new york city manhattan it turns out

that uh

there's a differential now why is there

differential because the assets are

scarcer

or the thing that causes price to go up

is

it's scarce and it's desirable

right and so you can't really come up

with one one

price of of real estate inflation in the

united states because

there's a lot of land in kansas and of

what you what you aspire to is five

acres

of property and a nice house in kansas

that's not going to inflate

at the same rate as aspiring to a 4 000

square foot apartment in new york city

you can just look at the prices in

jackson hole

and i i know the first time i went out

there and looked at the prices for real

estate i said why is everything so

expensive well then once you realize

that

the land out there is super scarce

because you have

all these state parks and everything

surrounding it that have

created this this island of of

land that's available you can see why

the prices are sky high and

because it's scarce it's now when you're

talking about

real estate and you're talking about the

inflation associated with it

let's go into equities let's go into

fixed income

and talk about how this quote-unquote

inflation is impacting

securities

yeah so if i want to live on my own as a

single person i want to rent an

apartment

and my market basket is food and energy

and uh and a nice apartment and a car

if i if i want to have a family and own

my own home

my market basket evolves to be a lot

more family health care

higher education for my kids more land

for everybody to

you know play behind the house a house

real estate property taxes more

utilities

appliances uh and uh

you know and maybe family vacations

right

and the like so that's a different

market basket for the for the middle

class

family if

if i want to be

wealthy then my market basket that i

aspire to is is a

a very nice uh an elegant

estate in the country or beachfront

property

in a hip cool town like miami beach or

southampton or or or the or malibu

right that becomes a different market

basket and of course

you know a home in l.a and hollywood

health

hills that's a different inflation rate

if i want to be really rich

what a what do the wealthy aspire to

well

they're aspiring to own apple stock they

want to own stock

bonds real est commercial real estate

uh you want to own things that produce

income

so what's the cost

to buy a basket of shares in apple that

produce

a million dollars a year in dividends

well that cost doubled

in 12 weeks

100 inflation in 12 weeks this year

the the dividend didn't double the price

of the share doubled

therefore hyper inflation in a market

basket

of stocks in fact the s p

if we look at the s p index one of the

most interesting metrics is the number

of hours that you have to work in order

to buy a share in the s

p right and we see that chart and

that's doubled right that's shooting up

um

i've you know what what do the wealthy

want

well they want to buy real estate in

manhattan or tokyo or london

um they want to buy um they want to buy

uh dividend producing or income

producing

assets they either want to buy rent

producing real estate

or they want bonds that will that will

produce a good coupon

or they want stocks that either will

produce dividends or will

buy back shares so that they're

inherently deflationary or they will

grow

right the or they want uh they want

scarce out

they want to buy picassos they want art

or

finally or they want to buy franchises i

would like to buy

you know the jets i would like to buy a

football team

i would like to buy a baseball team

that's what really wealthy people wish

to do or they wish to buy jets or they

wish to buy yachts right

none of these things are in the cpi

basket

i mean the presumption of course is that

politicians have assumed that no one

wants to be wealthy

huh let me say that again politicians

have assumed

no one wants to be wealthy i guess if

you assume no one wants to be wealthy

and if you track the things that

don't that the wealthy people don't

aspire to then you won't

find inflation and then you won't have a

problem

as long as we agree that no one can be

wealthy right you're never going to get

there don't you think that that's a

little bit more

out of convenience for the fiscal

spending

that aggressively has become more and

more

uh aggressive

that it complements their ability to

continue to spend

and obligate dollars and try to push

some of those dollars into into their

regions that they're

elected and so by having by using cpi

and pushing it lower and lower

they can just reduce that that interest

payment and and obligate even more funds

of taxpayer dollars i i think as long as

you

define the metric as cpi

and as long as you leave out every

scarce asset

every financial asset food and energy

then you can lock on to a basket of

goods that are inherently deflationary

you will never get inflation therefore

there will be no

check on your ability to keep printing

money and if you

when you print money if you call it

accommodation

we're a com we're providing 120 billion

dollars a month of accommodation

to make the markets fluid you know to

keep them functioning

right then you don't have to say

we're um devaluing the money by 120

billion dollars

a month and uh i think that's um

that's it's it's convenient thing at the

point that we redefine the market basket

as assets well we would have immediate

inflation and there would be immediate

check

and balance on the ability of any

central bank or any bank to

uh to create to devalue the currency

and so i don't think anybody wants to

have a check

on their on their abilities so so

this has been adopted as a metric the

mainstream media

um promulgates the metric and then

i i know why uh i i know why

someone running a central bank would

want to focus on the metric

i just think it's uh it's irrational for

macroeconomic analysts

and investors to fixate on the metric

and so for example if you if you're

defining a macroeconomic model that

that has cpi as an input

you're just engaging in metaphysical

musing

that that is increasingly uh

disconnected from reality let's come

back to

this uh inflation definition so i think

that you could define

um you can define a bunch of buckets and

it all cut

the definition of inflation comes down

to what are your what's your aspiration

if your aspiration is to be uh

is to be a billionaire then

the definition of inflation is the rate

at which

scarce assets that are going to continue

to appreciate

are going up in price right

so what's the best investment idea

bitcoin

what's what how fast does it go up going

up in price

200 percent this year we have hyper

inflation

in pure at property and pure

liquid money hyperinflation you know we

have inflation

in in uh scarce and desirable assets

um houses in the hamptons are up 50

and and uh 16 weeks right the price of a

house in the hamptons

what is that well when you buy a house

in the hamptons you're buying a a scarce

piece of property on a realist and on an

elite real estate network

when you buy a bitcoin you're buying a

scarce piece of property

on um a global liquid monetary network

okay which is better well clearly

bitcoin is better because bitcoin

is liquid global fungible i can take it

anywhere on earth

and and uh and by there's no property

tax on it

and i don't have to worry about new york

state taxing

my property away from me right so given

a choice between investing 20 million in

bitcoin or 20 million in hampton's

real estate clearly the rational thing

is by 20 million worth of bitcoin

but if you're a new yorker and you're

and you've decided you need to get

outside of manhattan well

all the wealthy new yorkers they all go

to the hamptons

that it's a it's a social network slash

real estate network

it's scarce ergo prices go up by 50

in three months and the transaction

volume goes up by 50 percent

and they're bet you know they're turning

over the entire real estate business is

up a hundred percent

year over a year the real estate agents

are doing great

is there inflation if you're if your

aspiration is to live an elegant life

of of affluence in the new york

area then you have hyperinflation

right uh in in that uh and and uh

that real estate market so and of course

they do right

go to a go to a wealthy new yorker and

say well you know um

there's no cpi inflation nothing to be

concerned about here

you just got to decide what you want to

put in the basket i think that when you

when you work your way through it you

conclude

you you can look at it as like five

buckets right there's the affluent

bucket and

and you're seeing 20 on

average across all assets right

it's like that 20 to 24 m2 monetary

supply expansion rate so you could say

that the inflation rate for just a broad

basket of assets is like

20 percent or so this year 24

that's why the stock market is an

all-time high because people that have

liquid

monetary energy they want to buy those

assets and they're all bidding against

assets that are scarce or they're

reasonably scarce

not totally scarce by the way the reason

that

those assets aren't going up as fast as

bitcoin

the the reason that gold is

outperforming maybe the s p

is because the s p can

they're producing more securities

they're producing more convertible debt

and more equity

and so it's not quite as scarce it's

harder to produce the gold

but of course it's really hard to

produce the bitcoin so

so uh what you've got is everybody

surging to acquire more assets

the asset supply isn't expanding as fast

as the money supply is expanding ergo

the price is going up that's that is

inflation of assets or or asset

inflation

i was called cost to capital

so let's talk about that a little bit

more because a lot of the people in our

audience are people that are trying to

perform economic calculation they're

trying to

value a business and i love this example

of

m2 that you're talking about use and

using it in a frame of reference as your

risk-free rate

and then talk to us about so talk to us

about that a little bit and then also

talk to us about

whatever the risk premium would be on

top of this quote-unquote risk-free rate

okay yeah so

so our inflation is just a vector so

you've got you've got a market basket of

stuff that's deflationary it's not

inflating another market basket of stuff

that's probably going up three to five

percent

you've got another market basket of

stuff that's going up eight percent but

but if you really want the best measure

if your goal is wealth preservation i

if your desire is to be wealthy or to

stay wealthy

wealth preservation you're either

pursuing wealth or you wish to keep

preserve wealth you wish to preserve

shareholder value your best surrogate is

cost to capital

which is closest to the rate of the

broad money supply expansion which was

24

this year which as we look out is going

to be

probably between 10 and 15 a year every

year for the next five years

and that's that's based upon the federal

reserve policy

the eu central bank policy you know you

you've had uh len alden estimate that

she thought it was 13

but you know a lot of the estimates are

um

are optimistic and politically correct

nobody can stand up on television and

they can't estimate well it's going to

be

it was 24 this year it'll stay 20 next

year and then 20 percent and then

30 because that's like not forecasting a

v-shape recovery

you know in march everybody forecast a

v-shape recovery you kind of have to

because otherwise you're kind of

cassandra debbie downer politically

incorrect

no one could forecast an l-shaped

recovery that is

main street's going down and not coming

back up again have you noticed that you

haven't seen

anybody talk about the l-shaped recovery

on television

well you know here's the joke we got a